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December 18, 2020

RBI states that it did not issue any instructions to link existing bank accounts to Aadhaar

by CA Shivam Jaiswal in RBI

RBI states that it did not issue any instructions to link existing bank accounts to Aadhaar

Aadhaar is a 12-digit unique random number that is issued by the UIDAI- Unique Identification Authority of India to the Indian residents after a set of the identification process arranged by the Authority. Aadhaar Authentication is a process by which the Aadhaar number together with the demographic and biometric statistics of an Aadhaar cardholder is deposited into the Central Identities Data Repository or CIDR for its authentication and such storehouse validates the accuracy of the data or whether the same is insufficient basis the available data on it. Aadhaar Authentication aims to provide an online platform of identity to validate the identity of the Aadhaar card holder promptly anytime and at anyplace.

The Reserve Bank of India (RBI), also known as the Apex Bank of India was established as India’s central bank to regulate the issue of banknotes and the keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage and to formulate a modern monetary policy framework to meet the challenge of an increasingly complex economy. The primary objective of the monetary policy is to maintain price stability while keeping in mind the objective of growth.

The RBI has again clarified that it has not issued any instructions for linking the existing bank accounts with Aadhaar. In 2017 also, RBI had denied having issued any instruction for mandatory linking of Aadhaar number with bank accounts.

Why was this clarification issued by RBI?

This clarification by RBI was in response to an application filed by the Software Freedom Law Centre (SFLC) under the Right to Information (RTI) Act to check the veracity of a statement by finance minister Nirmala Sitharaman about linking the existing bank accounts with Aadhaar by March 2021.

Why was the petition signed by SFLC?

In November 2020, while speaking at the virtual annual general meeting (AGM) of the Indian Banks’ Association (IBA), the finance minister had said that banks should ensure all accounts are Aadhaar-seeded and linked with the permanent account number (PAN) by 31st March 2021

After the speech of Ms Sitharaman, SFLC decided to file an RTI application with RBI to know if the central bank had issued any instructions in this regard.

What was the reply given by RBI?

In its reply, RBI told SFLC that they had not issued any instructions to link the existing bank accounts to Aadhaar. RBI also suggested to refer to extant instructions on know-your-customer (KYC), which were available in their master direction on KYC dated 25th February 2016 as amended on 20th April 2020.

While RBI was quick to fall in line with the finance ministry in issuing master directions for Aadhaar, after the Supreme Court order, it had never issued any notification in this regard or asked banks to de-link Aadhaar number of account-holders.

In September 2018, the Supreme Court declared Section 57 of the Aadhaar Act as unconstitutional. This meant bank account-holders, e-wallet or mobile wallet users and mobile subscribers were no longer required to use their Aadhaar number. 

Remember, despite the matter reaching the Supreme Court, the government continued with its mission to mandate Aadhaar for everything. In fact, as stated in the apex court, the government had issued as many as 144 notifications to make Aadhaar mandatory for over 200 services or benefits. This includes those services or benefits totally unrelated with Section 7 of the Aadhaar Act for which money needs to be spent from the Consolidated Fund of India.

Section 139AA was inserted in the Income Tax Act by Budget 2017. This section makes it mandatory to link PAN with Aadhaar. This section states that every person who has PAN as on July 1, 2017 is required to link his/her PAN with his/her Aadhaar number. As per the rules if PAN is not linked with Aadhaar by 31st March, 2021, then the PAN will become invalid. One will not be able to use their Pan to conduct financial transactions where quoting of PAN is mandatory. The PAN and Aadhaar can be used interchangeably, once linked.

In the case of SFLC, since its RTI reply was in contrast with what the finance minister had stated, the banking regulator may soon be ‘asked’ to issue necessary directions on linking Aadhaar with existing bank accounts.

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